Being a resident of South Carolina’s First Congressional District, I am curious whether Linda Ketner is actually a different kind of Democrat. Is she actually going to bring change or is she just going to be another rubber stamp for Nancy Pelosi and Barney Frank?

So, I decided to start out by reading her biography which she seems to be so proud of. I can see why she is running on the Democratic ticket.

Much of her efforts seem to be related to housing issues which on a national scale are the basis of our current financial crisis. Anyone who has missed the fact that the disintegration of the housing market was caused by Fannie Mae and Freddie Mac operating in an essentially unregulated manner, falsifying their accounting books to provide their senior management with increased bonuses and either encouraging or coercing lending institutions to write risky home loans and then being the agents to pass these high risk loans into the investment sector which in turn caused numerous commercial and investment banks to fail when the portfolios put together by Fannie Mae and Freddie Mac were deemed to be either worthless or of an indeterminate value …, well, anyone who has missed that has been either in suspended animation, hibernating or lost in space for the past 11 months.

To quote Ms. Ketner’s bio, Biography | Linda Ketner For Congress, “Linda formed South Carolina Citizens for Housing in 1991… . Some of Linda’s leadership positions include: Chair of the Mayor’s Council On Homelessness and Affordable Housing, Chair of the S.C. Housing Trust Fund, Founder of South Carolina Citizens For Housing, … Founder of Charleston Affordable Housing and South Carolina Equality Coalition.”

Ms. Ketner’s efforts, since 1991, have been right in line with the major Democratic supporters of Fannie Mae and Freddie Mac. My question is, “Was she competing with Fannie Mae and Freddie Mac … or colluding with them?” Also, have her efforts had anything to do with ACORN, an organization some consider a radical left wing operation which, among other things deals with housing issues a as well as other activities like its union affiliates and voter registration efforts which have led to a number of its operatives receiving felony convictions for voter fraud?

It seems that Ms. Ketner, like all of the rest of the Democrats, wants to blame the Republicans for deregulating Wall Street and, in some delusional, mystical or magical way, to try to insinuate that all of the current financial crisis is not related to corruption and fraud in Fannie Mae and Freddie Mac and the Democrats’ efforts to block increased or basically any regulation of those two out of control institutions but to some undefined deregulation on Wall Street which has nothing to do with what happened at Fannie Mae and Freddie Mac. In fact, early in his first administration, even President Clinton tried to reign in these two corrupt giants but was blocked by his own party. Did you just see Ms. Ketner pull a quarter out of your ear?

The Republicans contribution to this entire mess was the failure of SEC chairman Chris Cox, a Bush appointee, to adequately oversee the functions of the SEC which basically ignored what was going on even though it knew about it as reported in a recent Inspector General’s report and, then Chairman Cox failed to exercise a power he had to change the “mark to market rule”. He was finally reminded of this authority last week by the Senate and has subsequently acted … after 11 months … hopefully not too late.

To the contrary, President Bush, since 2001, has been trying unsuccessfully to increase the regulation on Fannie Mae and Freddie Mac and has been opposed and obstructed every step of the way by such prominent Democrats as Barney Frank, Chris Dodd and Chuck Schumer. President Bush sent Treasury Secretary John Snow to Congress with warnings about irregular accounting practices and increasing risks of continuing the high risk policies of Fannie Mae and Freddie Mac. He sent Alan Greenspan who warned of the potential of a financial crisis if the practices of Fannie Mae and Freddi mac continued to go unchecked. They were ridiculed by Democrats like Barnie Franks, Maxine Waters and Chris Dodd. John McCain warned of a pending financial crisis two years ago as the Republicans tried to get a bill passed to increase regulation on these two entities which was voted down by the Democrats.

Think about it? If there were Republicans actually responsible for this crisis, don’t you think there would be several hundred special investigations going on right now with the current Democratic majority And, with the Democrats maintaining a majority in Congress, do you think that there is going to be any sort of investigation or commission to study the crisis? Barack Obama has already said that notion, an investigation or commission, which has been suggested by John McCain was “ridiculous”. I imagine he does think the idea of investigating the cause of the current financial crisis is ridiculous. What could John McCain be thinking? No sane Democrat would want that.

Now everyone will argue that the Republicans have controlled Congress for six of the past eight years. Actually, some will argue that the Republicans have controlled Congress for the past eight years. I’ve actually heard that one frequently. Based on that, I understand why the Democrats think they can win. There’s nothing like appealing to and feeding on people’s ignorance. Ms. Ketner knows that it takes a majority of 60 in the Senate to override the possibility of a filibuster. The Republicans have never had more than 55 members in the Senate in the past eight years … or past twelve years. The Democrats last had that kind of majority in the 1960’s. Without a majority of 60, the minority party can, in effect, veto any bill it doesn’t want passed. That’s why the Democrats are trying real hard to get 60 Senate seats. Simple majority rules in the House … not so in the Senate. The Founding Fathers were very smart … although many Democrats would resentfully disagree.

But, somehow, the Republicans are responsible for the current meltdown of the housing markets and the resultant financial crisis. Even though you can hear and see the words coming from the Democratic Congressmens’ and Senators’ mouths on video tapes of the events, the Democrats …. like Ms. Ketner … are in complete denial of the obvious truth. President Bush can justifiably be held responsible for a lot of things … but this isn’t one of them. The evidence is in plain view for anyone to see.

Now, all of these things that Linda Ketner has done, … well, they’re very admirable. There’s nothing wrong with trying to get people affordable housing and trying to help people own homes … unless and until it starts hurting other people. Can anyone deny that the current financial crisis has the capability of hurting a lot of people.

Now … I don’t know if the things that Linda Ketner has been doing for the past 17 years has anything to do with the meltdown of Fannie Mae and Freddie Mac, but … it all sounds an awful lot like a lot of what many of the rest of the Democrats like Barney Frank, Chris Dodd and Chuck Schumer have been up to for a long time.

So, my question is, “How much have Linda Ketner’s efforts been tied to risky loans handled through Fannie Mae and Freddie Mac which are the cause of the meltdown of the housing market?

I’d like her to answer that.

No. I’d like someone else to look into that … some entity that doesn’t have a vested interest in winning a political campaign. It’s not that I don’t trust you Ms. Ketner. But, in my opinion, you have a knack for either stretching the truth or completely ignoring it and you haven’t been completely candid in your assessment of what and who has been wrong for the past seven or eight years. If you do consider yourself candid, then I question your ability to accurately assess a financial situation … or anything else.

This afternoon the House of Representatives has finally passed it’s version of the finance bill which has been commonly referred to as a “bail out” bill committing the American taxpayers to $700 billion in financial guarantees for commercial and investment banking firms trading on Wall Street.

My personal view of the bill is that it wasn’t necessarily a bail out for Wall Street firms and wasn’t and isn’t going to cost $700 billion. Even though commercial and investment banking firms found themselves holding mortgage derivatives or paper which they couldn’t sell leaving the assets with values impossible to determine by current accounting practices enforced by the SEC, I never felt that the assets were “worthless” as Ron Paul and others have stated previously. They would only be worthless if the mortgages were written for property that didn’t exist.

As I mentioned in a previous article, Was John McCain Right About Wanting to Fire SEC Chairman Cox? « Earl says … on 9/24/2008, the commercial and investment banks have been hamstrung by an accounting rule imposed by the SEC which was forcing them to value assets at fire sale prices which, in a rapidly downward spiraling market, made it virtually impossible to determine portfolio values according to those accounting rules.

Unfortunately, this could have been prevented by SEC chairman, Chris Cox, since he had the authority to amend the rules at his own discretion … but didn’t. This was only one of the many blunders committed by the SEC under his chairmanship as pointed out by an Inspector General’s report earlier this week.

The Securities and Exchange Commission brought some much needed cheer to the US financial sector after issuing accounting guidelines that could help curb the billions of dollars of writedowns reported by the country’s leading banks.

It seems that it is entirely possible that much if not all of the financial turmoil which has occurred over the past 11 months might have been avoided with some insightful judgement and knowledgeable action.

If changing the accounting rules are a good idea now, why shouldn’t it have been a good idea 11 months ago?

It seems that a lot of awfully smart people might have missed the boat on this one.

How does this effect the $700 billion “bail out”? Was it necessary?

My opinion is that it was necessary to restore some level of confidence in the market. I doubt that most people would have bought the notion that a simple change in an accounting rule would have saved the day many months ago and would only believe that some draconian measure by the government would suffice.

Now the government will buy some property which will have some added value in the future which should turn a profit for the taxpayer. That is, unless some Congressmen don’t take the money and throw it away somewhere else. And, I doubt that very much of the $700 billion will actually have to be used. It should simply be considered as a line of credit to make purchases and not a full blown loan which is already gone out the door.

Since Wells Fargo and Citigroup are now actively haggling over Wachovia, there is an indication that all is not lost and there are some good buys in all of this mess.

So, is the “bail out” actually a moot point?

From a psychological standpoint … no. From a practical standpoint … maybe.

It appears that the reactionary John McCain might have been right on the money in demanding the firing of the SEC chairman.

Maybe Chris Cox will just do everyone a favor and simply resign. It appears obvious that, in some way, he might not have been doing his job. There’s nothing like being “a day late and a dollar short” … or $700 billion short … or a $1 trillion short.

Now he’s calling for scrapping the voluntary regulation program for the investment banks … and the meltdown has been going on for how long … nearly 11 months?

A short time ago, John McCain said the chairman of the SEC (Securities and Exchange Commission), Chris Cox, should be fired. For making this statement many ridiculed McCain for being reactionary and hot headed.

Supporters of Chairman Cox have pointed out that the chair of the SEC has limited regulatory powers and hasn’t had the authority to regulate many of the activities which have brought on the current financial crisis.

On Fox News this afternoon some accounting experts pointed out some information that would indicate otherwise.

According to them, a simple change in accounting requirements which the chairman of the SEC does have the authority to effect might have averted the current crisis.

Let me see if I can explain this correctly.

Current accounting regulations require that the mortgage packages have to be valued at what they would sell in the current market. This would value the mortgage packages at whatever they would sell for even under the worst conditions which these instututions currently face. This has caused a continuing downward spiral in the value of all the loan packages as if they all had to be sold today … at current market prices … as if they all had to be sold at a fire sale, regardless of whether the mortgages in the packages were being properly serviced by current home owners.

In other words, the mortgages of the 95% of the people who are actually making regular payments on their loans are being treated as having the same value of the loans of the less than 5% who have defaulted on their loans.

How does this affect the credit market? As the values of the loan portfolios have contracted because they all have to be valued as if they had to be sold today or were all literally worth nothing, this has caused a contraction on the perceived value of the bank’s assets which in turn has caused a contraction in the amount of credit a bank can extend.

In other words, a bank can only loan a multiple of its assets. The example given was a bank being able to make loans valued at 10 times its assets. If the assets are forced through accounting rules to be devalued from $100 billion to $10 billion, then the credit a bank can extend decreases correspondingly.

What does all of the have to do with the chairman of the SEC. Apparently, he has the authority to change the accounting rules so that the banking or investment institutions could change how they value their assets … say to fair market value or some other standard. One mentioned was basing the mortgages on current rental or mortgage payment income.

Let’s face it, we aren’t paying our property taxes based on the value of a forced sale of our homes. We all know if we had to sell our homes today we’d take a beating and only receive a fraction of its true worth.

Imagine the effect on cities, counties and state governments if they had to change their property assessments to the worst case value of the properties within their jurisdictions.

Well, that’s exactly what’s being done to the investment banks and commercial banks.

And, apparently, the chairman of the SEC has the authority to change that. It appears that if he had, that action might have been one of the things that could have been done to avert the current crisis.